Pharmacy Benchmarking Report – Contact magazine Dec 2015 / Jan 2016

Once again it is time to discuss our annual Pharmacy Benchmarking Survey, which was published on 1 December 2015.

This year we had 108 pharmacies across New Zealand participate in our survey. Having completed a similar survey each year since 2013 some trends have been identified and a number of these are easy to see in the following table.

The fall in gross profit margin over the last three years is a result of several factors.

The first being that a number of pharmacies seem to be dispensing more high cost medicine than during the previous year. This increases revenue and reduces gross profit percentage by nature.

Secondly retail sales continue to comprise less of a pharmacy’s total revenue and now total at 24.8% of the total revenue.

We have observed that wages have risen once again and this now remains a major cost after goods in the running of a successful pharmacy. Script numbers have also continued to rise with the average pharmacy dispensing 77,120 items during the year, which is 2,264 more than the previous year.

Unfortunately the increase in number of items dispensed does not appear to correspond to an increase in service revenue.

Since the changes to the way pharmacies are remunerated for their services were introduced, we have started breaking down the various revenue streams in the profit and loss reports. The 2015 revenue stream reports show the following statistics:

The results by occupancy type show that pharmacies inside a Medical Centre tend to still show a better net profit before tax than mall pharmacies and stand alone pharmacies.

The other point of interest is labour costs versus total pharmacy revenue. Our survey shows the relationship between labour costs and total pharmacy revenue is often the most important for a pharmacy and this is demonstrated in a graph in our survey. While it is not surprising that the average wage spend had increased given the increase in the average number of items dispensed, as well as other factors including general inflation, there remains a strong correlation between the level of wage expenditure and overall level of profitability of the pharmacy.

Over the last few years, due to the increase in pharmacy values, the return on an asset derived by an average pharmacy shows a substantial decrease. In 2013 the median return on asset was 27.18% whereas in 2015 that ratio is now at 15.43%.

At these challenging times, it is important that pharmacy owners put time and effort into ensuring they are measuring their financial performance on a regular basis to achieve success.

Pharmacy Benchmarking Report – Contact magazine Dec 2015 / Jan 2016

Client profiles

The Pharmacy Guild of New Zealand (Inc) is a national organisation that looks after the business interests of community pharmacy owners. Pam Sceats is the Guild’s accounts manager and has been with the organisation for just over seven years.Read more »